☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For
Quarter Ended March 31, 2015

OR

☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For
the Transition Period from _______ to _______

Commission
file number 33-20432

KIWIBOX.COM,
INC.

Formerly
known as Magnitude Information Systems, Inc.

(Exact
Name of Registrant as Specified in its Charter)

Delaware

75-2228828

(State or other Jurisdiction of

(IRS Employer Identification No.)

Incorporation or Organization)

330
West 42ND St. Suite 3210 New York, NY 10036

(212)
239-8210

(Address of Principal Executive Office) (Zip
Code)

(Registrant’s telephone number
including area code)

Indicate
by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports)
and (2) has been subject to such filing requirements for the past 90 days.: Yes ☒ No ☐

Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller
reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act (Check one):

Large
accelerated filer ☐

Non-accelerated
filer ☐

Accerlerated
filer ☐

Smaller reporting
company ☒

Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.):

Yes
☐ No ☒

The
number of shares of Registrant’s Common Stock, $0.0001 par value, outstanding as of May 14, 2015, was 683,693,060 shares.

KIWIBOX.COM,
INC.

INDEX

PAGE

NUMBER

PART 1 - Financial Information

Item 1

Financial Statements

2

Balance Sheets

2

- March 31, 2015 (unaudited) and December 31, 2014

Statements of Operations and Comprehensive Income (Loss)

3

-Three months ended March 31, 2015 and 2014 (unaudited)

Statements of Cash Flows

4

- Three months ended March 31, 2015 and 2014 (unaudited)

Notes to Financial Statements

5

Item 2

Management’s Discussion and Analysis of Financial
Condition and Results of Operations

The
accompanying notes are an integral part of the financial statements.

-2-

Kiwibox.Com,
Inc.

Statements
of Operations and Comprehensive Income (Loss) (Unaudited)

Three
Months Ended March 31,

2015

2014

Net Sales

Advertising
- affiliate

$

8,955

$

10,914

Other

—

—

Total
Net Sales

8,955

10,914

Cost of Goods Sold

Website
hosting expenses

2,833

—

Total Cost of Goods
Sold

2,833

—

Gross Profit (Loss)

6,122

10,914

Selling expenses

150,741

70,199

General and administrative
expenses

179,592

178,607

Loss
From Operations

(324,211

)

(237,892

)

Other Income
(Expense)

Interest expense

(286,709

)

(256,483

)

Interest expense-derivative
conversion features

(562,130

)

(483,452

)

Change
in fair value – derivative liabilities

136,738

45,786

Total
Other Income (Expense)

(712,101

)

(694,149

)

Loss Before
Benefit (Provision) for Income Taxes

(1,036,312

)

(932,041

)

Benefit
(Provision) for Income Taxes

—

—

Net Loss

$

(1,036,312

)

$

(932,041

)

Dividends
on Preferred Shares

(12,816

)

(12,816

)

Net
Loss Applicable to Common Shareholders, basic and diluted

$

(1,049,128

)

$

(944,857

)

Net
Loss Per Common Share, basic and diluted

$

(0.002

)

$

(0.001

)

Weighted Average
of Common Shares Outstanding

683,693,060

683,693,060

Comprehensive Income (Loss):

Net Income (Loss)

$

(1,036,312

)

$

(932,041

)

Other Comprehensive
Income (Loss)

-

-

Total Comprehensive
Income (Loss)

$

(1,036,312

)

$

(932,041)

The accompanying
notes are an integral part of the financial statements.

-3-

Kiwibox.Com,
Inc.

Statements
of Cash Flows (Unaudited)

Three
Months Ended
March 31,

2015

2014

Cash
Flows From Operating Activities

Net
Loss

$

(1,036,312

)

$

(932,041

)

Adjustments
to Reconcile Net Loss to Net Cash
Used by Operations

Depreciation
and amortization

1,249

2,576

Change
in fair value – derivative liabilities

(136,738

)

(45,786

)

Intrinsic
value of beneficial conversion feature

562,130

483,452

Decreases (Increases) in Assets

Accounts
receivable affiliates

(8,955

)

-

Due
from related party

(74

)

(10,914

)

Prepaid
expenses

60,654

54,208

Increases
(Decreases) in Liabilities

Bank
overdraft

–

2,261

Liabilities
to be settled in stock

4,290

4,320

Accounts
payable

(13,031

)

(41,544

)

Accrued
expenses

284,650

251,711

Net
Cash Used by Operating Activities

(282,137

)

(231,757

)

Cash
Flows From Investing Activities

Cash
proceeds (outlay) – other assets

4,972

—

Purchases
of property and equipment

(999

)

—

Net
Cash Provided by Investing Activities

3,973

—

Cash
Flows From Financing Activities

Proceeds
from loans/notes payable

275,000

225,000

Net
proceeds (repayments) to related parties

4,060

3,098

Net
Cash Provided by Financing Activities

279,060

228,098

Net
Increase (Decrease) in Cash

896

(3,659

)

Cash
at beginning of period

299

3,659

Cash
at end of period

$

1,195

$

—

SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION

Interest
Paid

$

—

$

1,511

Income
Taxes Paid

$

300

$

—

The
accompanying notes are an integral part of the financial statements.

-4-

Kiwibox.Com,
Inc.

Statements of Cash Flows (Unaudited)

NON-CASH INVESTING AND FINANCING ACTIVITIES:

Three Months Ended March 31, 2015

Quarter to date dividend accruals

$

12,816

Three Months Ended March 31,
2014

Quarter to date dividend accruals

$

12,816

-5-

Kiwibox.Com,
Inc.

Notes
to Financial Statements

1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature
of Organization

Kiwibox.Com,
Inc. (the “Company”) was incorporated as a Delaware corporation on April 19, 1988 under the name Fortunistics, Inc.
On November 18, 1998, the Company changed its name to Magnitude Information Systems, Inc. On December 31, 2009, the Company changed
its name to Kiwibox.com, Inc.

On
August 16, 2007 the Company acquired all outstanding shares of Kiwibox Media, Inc.

The
Company, Magnitude, Inc. and Kiwibox Media Inc. were separate legal entities until December 31, 2009, with Kiwibox Media, Inc.
being a wholly owned subsidiary. On December 31, 2009, the two subsidiaries, Magnitude, Inc. and Kiwibox Media, Inc. merged into
the Company.

On
September 30, 2011, Kiwibox.com acquired the German based social network Kwick! Community GmbH & Co. KG (“Kwick”),
a wholly-owned subsidiary.

On
September 24, 2013, Kwick signed an equity purchase agreement to acquire Interscholz Internet Services GmbH and Co KG, a German
limited liability company, and all the equity of its general partner, Interscholtz Beteiligungs GmbH. On December 9, 2013 the
acquisition of Interscholz Internet Services GmbH and Co KG by Kwick was rescinded due to non-compliance with the terms of the
addendum to the contract. However, Kwick did acquire all the equity of the general partner, Interscholz Beteiligungs GmbH, as
full payment was not a requirement for transfer of ownership of that entity.

On
December 10, 2013, the Company signed an Equity Purchase Agreement with Marcus Winkler to sell to him eighty (80%) percent of
the equity of its German subsidiary, KWICK! Community GmbH & Co. KG, a German limited liability company, and Kwick! Beteiligungs
GmbH, its general partner (collectively, “Kwick”). The sale was approved on December 18, 2013. Due to the fact that
the parent company ceased to have a controlling financial interest in Kwick, the subsidiary was deconsolidated from that date
forward.

Interim
Financial Information

The
condensed balance sheet at December 31, 2014 was derived from audited financial statements but does not include all disclosures
required by accounting principles generally accepted in the United States of America. The other information in these condensed
financial statements is unaudited but, in the opinion of management, reflects all adjustments necessary for a fair presentation
of the results for the periods covered. All such adjustments are of a normal recurring nature unless disclosed otherwise. These
condensed financial statements, including notes, have been prepared in accordance with the applicable rules of the Securities
and Exchange Commission and do not include all of the information and disclosures required by accounting principles generally
accepted in the United States of America for complete financial statements. These condensed financial statements should be read
in conjunction with the financial statements and additional information as contained in our Annual Report on Form 10-K for the
year ended December 31, 2014

Cash
and Cash Equivalents

The
Company accounts for cash and other highly liquid investments with original maturities of three months or less as cash and cash
equivalents.

Depreciation
and Amortization

Property
and equipment are recorded at cost. Depreciation on equipment, furniture and fixtures and leasehold improvements is computed on
the straight-line method over the estimated useful lives of such assets between 3-10 years, or lease term for leasehold improvements,
if for a shorter period. Maintenance and repairs are charged to operations as incurred. Software costs are amortized using the
straight line method and amortized over their estimated useful lives. Amortization begins when the related software is ready for
its intended use in accordance with Accounting Standards Codification (“ASC”) 350-40, Internal-Use Software, Subsequent
Measurement.

-6-

Kiwibox.Com,
Inc.

Notes
to Financial Statements

1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued

Foreign
Currency Translation

Assets
and liabilities of foreign operations are translated into U.S. dollars at the rates of exchange in effect at the balance sheet
date. Income and expense items are translated at the weighted average exchange rates prevailing during each period presented.
Gains and losses resulting from foreign currency transactions are included in the results of operations. Gains and losses resulting
from translation of financial statements of our foreign subsidiary operating in a non-hyperinflationary economy are recorded as
a component of accumulated other comprehensive loss until either sale or upon complete or substantially complete liquidation by
the Company of its investment in the foreign entity. The accumulated gain or (loss) on foreign currency translation adjustment
waseliminated on December 18, 2013 due to the deconsolidation of the Company’s
foreign subsidiary.

Advertising
Costs

Advertising
costs are charged to operations when incurred. Advertising expense was $1,000 and $0 for the

three
months ended March 31, 2015 and 2014, respectively.

Evaluation
of Long Lived Assets

Long-lived
assets are assessed for recoverability on an ongoing basis. In evaluating the fair value and future benefits of long-lived assets,
their carrying value would be reduced by the excess, if any, of the long-lived asset over management’s estimate of the anticipated
undiscounted future net cash flows of the related long-lived asset.

Any
impairment of the Company’s internally-developed software is recognized and measured in accordance with the provisions of
ASC 360-10-35, Intangibles-Goodwill and Other, Internal-Use Software, Subsequent Measurement, which requires that assets
be grouped at the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of other
groups of assets. The guidance is applicable, for example, when one of the following events or changes in circumstances occurs
related to computer software being developed or currently in use indicating that the carrying amount may not be recoverable:

a. Internal-use
computer software is not expected to provide substantive service potential.

b. A
significant change occurs in the extent or manner in which the software is used or is expected to be used.

c. A
significant change is made or will be made to the software program.

d. Costs
of developing or modifying internal-use computer software significantly exceed the amount originally expected to develop or modify
the software.

Fair
Value Measurements

The
Company adopted the provisions of ASC 820, Fair Value Measurements and Disclosures, which is effective for fiscal years
beginning after November 15, 2007, and interim periods within those fiscal years. Under ASC 820, a framework was established for
measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements.
The Company accounted for certain convertible debentures issued in the year ended December 31, 2014 and the three months ended
March 31, 2015 as derivative liabilities required to be bifurcated from the host contract in accordance with ASC 815-40, Contracts
in Entity’s Own Equity, as the conversion feature embedded in the convertible debentures could result in the note principal
and related accrued interest being converted to a variable number of the Company’s common shares (see Note 13).

-7-

Kiwibox.Com,
Inc.

Notes
to Financial Statements

1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued

Securities
Issued for Services

The
Company accounts for stock, stock options and stock warrants issued for services and compensation by employees under the fair
value method. For non-employees, the fair market value of the Company’s stock on the date of stock issuance or option/grant
is used. The Company has determined the fair market value of the warrants/options issued under the Black-Scholes Pricing Model.
The Company has adopted the provisions of ASC 718, “Compensation – Stock Compensation”, which establishes accounting
for equity instruments exchanged for employee services. Under the provisions of ASC 718, share-based compensation cost is measured
at the grant date, based on the fair value of the award, and is recognized as an expense over the employee's requisite service
period (generally the vesting period of the equity grant).

Reclassification
of Certain Securities Under ASC 815-15

Pursuant
to ASC 815-15, “Contracts in Entity’s own Equity”, if a company has more than one contract subject to this Issue,
and partial reclassification is required, there may be different methods that could be used to determine which contracts, or portions
of contracts, should be reclassified. The Company's method for reclassification of such contracts is reclassification of contracts
with the latest maturity date first.

Capitalization
of Software /Website development costs

The
Company capitalizes outside-contracted development work in accordance with the guidelines published under ASC 350-50, “Website
Development Costs”. Under ASC 350-50, costs incurred during the planning stage are expensed, while costs relating to software
used to operate a web site or for developing initial graphics should be accounted for under ASC 350-50, Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use, unless a plan exists or is being developed to market the
software externally. Under ASC 350-50, internal and external costs incurred to develop internal-use computer software during the
application development stage should be capitalized. Costs to develop or obtain software that allows for access or conversion
of old data by new systems should also be capitalized, excluding training costs.

Fees
incurred for web site hosting, which involve the payment of a specified, periodic fee to an Internet service provider in return
for hosting the web site on its server(s) connected to the Internet, are expensed over the period of benefit, and included in
cost of sales in the accompanying financial statements.

A
total of $0 and $0 was capitalized for web-site development work during the three months ended March 31, 2015 and 2014, respectively.

Income
Taxes

The
Company provides for income taxes based on enacted tax law and statutory tax rates at which items of income and expenses are expected
to be settled in the Company’s income tax return. Certain items of revenue and expense are reported for Federal income tax
purposes in different periods than for financial reporting purposes, thereby resulting in deferred income taxes. Deferred taxes
are also recognized for operating losses that are available to offset future taxable income. Valuation allowances are established
when necessary to reduce deferred tax assets to the amount expected to be realized. The Company has incurred net operating losses
for financial-reporting and tax-reporting purposes. Accordingly, for Federal and state income tax purposes, the benefit for income
taxes has been offset entirely by a valuation allowance against the related federal and state deferred tax asset.

-8-

Kiwibox.Com,
Inc.

Notes
to Financial Statements

1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued

Net
Loss Per Share

Net
loss per share, in accordance with the provisions of ASC 260, “Earnings Per Share” is computed by dividing net loss
by the weighted average number of shares of Common Stock outstanding during the period. Common Stock equivalents have not been
included in this computation since the effect would be anti-dilutive. Such common stock equivalents totaled 90,503,240 common
shares at March 31, 2015, comprised of 12,750,000 shares issuable upon exercise of stock purchase warrants, 4,500,000 shares issuable
upon exercise of stock options, 729,537 shares exercisable upon conversion of convertible preferred shares, and 72,773,703 shares
potentially issuable upon conversion of convertible debt. Such debt and the related accrued interest with principal totaling $11,468,700,
convertible at the option of five debt holders at a price of 50% of the average closing price for the preceding 10 days, would
yield in excess of 16 billion shares if fully converted at March 31, 2015. However, the respective notes, all of which were issued
to these investors, carry a stipulation whereby the number of all shares issued pursuant to a conversion, may in the aggregate
not exceed a number that would increase the total share holdings beneficially owned by such investor to a level above 9.99%. At
the end of the year, this clause limits any conversion to the aforementioned number of shares. All of the aforementioned conversions
or exercises, as the case may be, are at the option of the holders.

Revenue
Recognition

The
Company’s revenue is derived from advertising on the Kiwibox.Com or, formerly, Kwick websites. Most contracts require the
Company to deliver the customer impressions, click-throughs or new customers, or some combination thereof. Accordingly, advertising
revenue is estimated and recognized for the period in which customer impressions, click through or new customers are delivered.
Licensing or hosting revenue consists of an annual contract with clients to provide web-site hosting and assistance.

Use
of Estimates

The
preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.

2.
GOING CONCERN

The
ability of the Company to continue its operations is dependent on increasing sales and obtaining additional capital and financing.
Our revenues during the foreseeable future are insufficient to finance our business and we are entirely dependent on the willingness
of existing investors to continue supporting the Company with working capital loans and equity investments, and our ability to
find new investors should the financial support from existing investors prove to be insufficient. If we were unable to obtain
a steady flow of new debt or equity-based working capital we would be forced to cease operations. In their report for the fiscal
year ended December 31, 2014, our auditors had expressed an opinion that, as a result of the above, there was substantial doubt
regarding our ability to continue as a going concern. The accompanying financial statements do not include any adjustments that
might be necessary if the Company were unable to continue as a going concern. Management’s plans are to continue seeking
equity and debt capital until cash flow from operations cover funding needs.

3.
CONCENTRATIONS OF BUSINESS AND CREDIT RISK

The
Company maintains cash balances in a financial institution which is insured by the Federal Deposit Insurance Corporation up to
$250,000. Balances in these accounts may, at times, exceed the federally insured limits. At March 31, 2015, cash balances in bank
accounts did not exceed this limit. The Company provides credit in the normal course of business to customers located throughout
the U.S. and overseas. The Company performs ongoing credit evaluations of its customers and maintains allowances for doubtful
accounts based on factors surrounding the credit risk of specific customers, historical trends, and other information.

-9-

Kiwibox.Com,
Inc.

Notes
to Financial Statements

4.
PREPAID EXPENSES

Prepaid
expenses consist of the following at:

March
31, 2015

December
31, 2014

Consulting
fees

$

165,000

$

220,000

Business
insurance

2,421

8,075

$

167,421

$

228,623

5.
PROPERTY AND EQUIPMENT

Property
and equipment consist of the following at:

March
31, 2015

December
31, 2014

Furniture

$

14,322

$

14,322

Leasehold
Improvements

24,130

24,130

Equipment

78,101

77,102

116,553

115,554

Less
accumulated depreciation

111,832

110,583

Total

$

4,721

$

4,971

Depreciation
expense charged to operations was $1,249 and $1,030 in the first three months of 2015 and 2014, respectively.

6. INTANGIBLE
ASSETS

Intangible
assets consisted of software for website development costs as follows:

March
31, 2015

December
31, 2014

Website
development costs

$

254,264

$

254,264

Less
accumulated amortization

254,264

254,264

Total

$

0

$

0

Amortization
expense for the three months ended March 31, 2015 and 2014 was $0 and $1,546, respectively.

7.
INVESTMENT IN UNCONSOLIDATED SUBSIDIARY

On
December 10, 2013, the company signed an equity purchase agreement with Marcus Winkler to sell to him eighty (80%) percent of
the equity of its German subsidiary, Kwick. Pursuant to the terms of the agreement, the purchaser paid 36,000 Euros as the purchase
price and the company was required to obtain shareholder approval of the sale as required under applicable Delaware Law. The majority
shareholder approval was obtained on December 18, 2013. In addition, the Company and Mr. Winkler signed a Lock-Up and Standstill
Agreement pursuant to the general terms of which the Company agreed not to participate in the management, operations or finances
of Kwick, which shall be exclusively managed and under control of the purchaser. Accordingly, the Company’s minority ownership
position shall be subject, in all respects, to the exclusive control of the purchaser. Mr. Winkler also has investment and voting
control over Kreuzfeld Ltd., a major creditor of the company, which holds a Class AA convertible promissory note with an outstanding
balance (including accrued interest) of $4,886,469 as of March 31, 2015.

-10-

Kiwibox.Com,
Inc.

Notes
to Financial Statements

7.
INVESTMENT IN UNCONSOLIDATED SUBSIDIARY (continued)

Due
to the significant reduction in the Company’s percentage of controlling interest in Kwick (down to 20%), coupled with the
contract restrictions over voting rights and management of the operations of Kwick subsequent to December 18, 2013, the Company
recognized the deconsolidation of Kwick as of that date, resulting in a loss on deconsolidation of $253,557, and now carries the
investment in Kwick under the cost method of accounting. Due to the significant reductions in fair value of this reporting unit
that were considered other than temporary, and impairment of the related goodwill, the carrying value of this cost method investment
was zero at December 31, 2014 and March 31, 2015.

8.
ACCRUED EXPENSES

Accrued
expenses consisted of the following at:

March
31, 2015

December
31, 2014

Accrued
interest

$

3,524,122

$

3,237,414

Accrued
payroll, payroll taxes and commissions

9,333

26,619

Accrued
professional fees

147,990

111,900

Accrued
rent/deferred rent obligation

12,069

12,196

Miscellaneous
accruals

—

20,735

Total

$

3,693,514

$

3,408,864

9.
OBLIGATIONS TO BE SETTLED IN STOCK

Obligations
to be settled in stock consisted of the following at:

March
31, 2015

December
31, 2014

Obligation
for warrants granted for compensation

$

100,000

$

100,000

600,000
common shares issuable to a consultant

who
was a director of the company, for services

rendered.

36,000

36,000

1,500,000
(2015) and 1,200,000 (2014) common

shares,
and 2,900,000 (2015) and 2,900,000 (2014)

stock
options issuable to two officers of the

Company
pursuant to their respective employment

Agreements

63,578

62,258

6,900,000
(2015) and 6,600,000 (2014) stock

options
issuable to one director who also serves

as
the Company’s general counsel

1,000,000
warrants granted on the Pixunity.de asset

Purchase

71,280

10,000

68,310

10,000

$

280,858

$

276,568

-11-

Kiwibox.Com,
Inc.

Notes
to Financial Statements

10.
LOANS PAYABLE

The
Company (formerly Magnitude, Inc.) had borrowings under short term loan agreements with the following terms and conditions at
March 31, 2015 and December 31, 2014:

On
December 4, 1996, the company (formerly Magnitude, Inc.) repurchased 500,000 shares of
its common stock and retired same against issuance of a promissory note maturing twelve
months thereafter accruing interest at 5% per annum and due December 4, 1998. This note
is overdue as of September 30, 2005 and no demand for payment has been made.

$

75,000

Total

$

75,000

11.
NOTES PAYABLE

March 31,

December
31,

2015

2014

Balance
of non-converted notes outstanding. Attempts to

locate
the holder of this note, to settle this liability, have been

unsuccessful.

$

25,000

$

25,000

From
September 2008 through March 2014 five creditors loaned the Company funds under the terms
of the convertible notes issued, as modified in March 2009 and July 2010 and April 2011
and August 2012(see Note 13).

During
2011, a shareholder loaned the Company $340,000 under demand notes at 10%.

11,468,700

340,000

11,193,700

340,000

Total

$

11,833,700

$

11,558,700

-12-

Kiwibox.Com,
Inc.

Notes
to Financial Statements

12.
LONG-TERM DEBT

Long-term
debt as of March 31, 2015 and December 31, 2014 is comprised of the following:

Discounted
present value of a non-interest bearing $70,000 settlement with a former investor of
Magnitude, Inc. to be paid in 24 equal monthly payments commencing July 1, 1997. The
imputed interest rate used to discount the note is 8% per annum. This obligation is in
default.

$

33,529

Total

33,529

Less
current maturities

33,529

Long-term
debt, net of current maturities

$

—

13.
DERIVATIVE CONVERSION FEATURES

On
July 27, 2010, the Company issued two Class A Senior Convertible Revolving Promissory Notes (“Class A Notes”), one
to Cambridge Services, Inc., in the principal amount of $683,996, consolidating the series of loans (and related accrued interest)
made to the Company since June 26, 2009, and one to Discover Advisory Company, in the principal amount of $1,160,984, consolidating
the series of loans (and related accrued interest) made to the Company since September 19, 2008 and including advances through
September 30, 2010. Each of these promissory notes are due on demand, accrue interest at the rate of 10%, per annum, are convertible
(including accrued interest) at the option of each lender into Common Stock of the Company at 50% of the averaged ten closing
prices for the Company's Common Stock for the ten (10) trading days immediately preceding the Conversion Date but in no event
less than $0.001 (the "Conversion Price"). Both promissory notes contain conversion caps, limiting conversions under
these notes to a maximum beneficial ownership position of Company common stock to 9.99% for each lender. Each of these notes contains
Company covenants, requiring the lenders’ prior written consent in order for the Company to merge, issue any common or preferred
stock or any convertible debt instruments, declare a stock split or dividends, increase any compensation to its officers or directors
by more than five (5%) during any calendar year. During the three months ended March 31, 2015, no debt was converted. During the
three months ended March 31, 2014, no debt was converted.

The
Company renegotiated certain outstanding promissory notes with its four major creditors, Discover Advisory Company of the Bahamas
(“DAC”), Kreuzfeld Ltd. of Switzerland (“Kreuzfeld”), Cambridge Services, Inc. of Panama (“CSI”)
and Vermoegensverwaltungs-Gesellschaft Zurich LTD of Switzerland (“VGZ”). As of August 1, 2012, the Company authorized
the issue of a new series of corporate notes, the Class AA Senior Secured Convertible Revolving Promissory Notes, dated as of
August 1, 2012 (the New Note(s)”) and issued New Notes: (1) to DAC, with a maximum credit facility of $5,000,000 which replaced
the Company’s outstanding Class A Senior Convertible Revolving Promissory Note, dated July 27, 2010, in the original principal
amount of $1,080,984, now cancelled, which had an outstanding balance due (including accrued interest) of $4,764,109 as of December
31, 2014 and $5,032,860 at March 31, 2015; (2) to Kreuzfeld, with a maximum credit facility of $5,000,000 which replaced the Company’s
outstanding Class A Senior Convertible Revolving Promissory Note, dated September 16, 2011, in the original principal amount of
$2,000,000, now cancelled, which had an outstanding balance due (including accrued interest) of $4,696,785 at December 31, 2014
and $4,886,469 at March 31, 2015; (3) to CSI, with a maximum credit facility of $2,000,000 which replaced the Company’s
outstanding Class A Senior Convertible Revolving Promissory Note, dated August 1, 2011, in the original principal amount of $1,303,996,
now cancelled, with an outstanding balance due (including accrued interest) of $3,730,580 as of December 31, 2014, and $3,807,184
at March 31, 2015 and; (4) to VGZ, with a maximum credit facility of $2,000,000 which replaced the Company’s outstanding
Class A Senior Convertible Revolving Promissory Note, dated September 30, 2010, in the original principal amount of $2,000,000,
now cancelled, with an outstanding balance due (including accrued interest) of $1,032,355 as of December 31, 2014 and $1,051,389
at March 31, 2015. All of the New Notes accrue interest at the rate of 10%, are convertible into common shares at the conversion
rate equal to 50% of the averaged ten closing prices for the Company's Common Stock for the ten (10) trading days immediately
preceding the Conversion Date but in no event less than $0.001, and are due on demand.. Pursuant to an Equity and Stock Pledge
Agreement, also negotiated and executed as of August 1, 2012, the repayment of the outstanding indebtedness of the New Notes is
secured by all of the limited partnership interests of the Company’s

-13-

Kiwibox.Com,
Inc.

Notes
to Financial Statements

13.
DERIVATIVE CONVERSION FEATURES (continued)

partly-owned
(now deconsolidated) German subsidiary, KWICK! Community GmbH & Co. KG, a private German limited partnership (“KG”),
and all of its shares of the sole general partner of KG, KWICK! Community Beteiligungs GmbH.

The
Company accounted for the conversion features underlying these convertible debentures in accordance with ASC 815-40, Contract
in Entity’s Own Equity, as the conversion feature embedded in the convertible debentures could result in the note principal
and related accrued interest being converted to a variable number of the Company’s common shares. The Company determined
the value of the derivate conversion features of new debentures issued to these holders plus accrued interest during the three
months ended March 31, 2015 under these terms at the relevant commitment dates to be $562,130 utilizing a Black-Scholes valuation
model. The change in fair value of the liability for the conversion feature resulted in income of $136,738 for the three months
ended March 31, 2015, which is included in Other Income (Expense) in the accompanying financial statements. The fair value of
these derivative conversion features was determined to be $14,907,819 at March 31, 2015.

14.
COMMITMENTS AND CONTINGENCIES

We
maintain offices for our operations at 330 W. 42th Street, New York, New York 10036, for approximately 990 square feet. This lease
requires initial minimum monthly rentals of $3,833 plus tenants’ share of utility/cam/property tax charges which average
approximately $291 per month. During 2013 the Company successfully negotiated a 5 year lease, with future minimum rentals as follows:

2015

36,009

2016

49,289

2017

50,768

2018

47,847

In
May 2010 the Company negotiated a lease of an apartment in New York City for the CEO in order to reduce travel costs. The lease
was for 12 months at $2,775 per month through May 31, 2011. In May 2011 the lease was extended through August 31, 2011 at the
rate of $2,837. In August 2011 the lease was extended through December 31, 2011 at the rate of $2,837 per month. In December 2011
the lease was again extended through May 31, 2012 with no change in the base rent. In May 2012 the lease was extended through
December 31, 2012 at a monthly rate of $2,943, this lease was then extended through December 31, 2013 at the same terms. In December
2013 the lease was extended through May 31, 2014. The lease was again extended through May 31, 2015 in May of 2014.

Our
total rent expenses were $21,667 and $17,722 during the three months ended March 31, 2015 and 2014, respectively.

During
the third quarter of 2010 the Chief Technology Officer took over the position of Chief Executive Officer with no changes to the
above terms, running through July 30, 2011. On October 6, 2010, the terms of the consulting agreement were modified. The new terms
called for a reduced monthly consulting fee of $16,667, and for $100,000 to be prepaid on January 1, 2011 thru June 30, 2011.
During the fourth quarter of 2011 this agreement was extended through December 31, 2012. During the fourth quarter of 2012 this
agreement was again extended through December 31, 2013 with the same prepayment provision. During the fourth quarter of 2013 the
terms of this agreement were modified. The new terms called for an increased monthly consulting fee to $18,333 effective January
1, 2014 through December 31, 2014. During the fourth quarter of 2014 the terms of this agreement were modified. The new terms
have the same monthly consulting fees as 2013, $18,333 a month, however; the prepayment provision called for the entire amount
payable in advance and as soon as practicable following the execution and delivery of this restated agreement. Payment for January
1, 2015 through December 31, 2015 was made on November 20, 2014 in accordance with the terms of this new agreement. There were
no changes to the stock compensation portion of any earlier agreement.

.

In
the three months ended March 31, 2015 and March 31, 2014 this officer was granted 300,000 shares.

-14-

Kiwibox.Com,
Inc.

Notes
to Financial Statements

15.
RELATED PARTY TRANSACTIONS

During
the three months ended March 31, 2015, the Company sold advertising space on its Kiwibox.com website to
Kwick
totaling $8,955, which is included in the $37,101 balance due from Kwick at March 31, 2015. Kwick is majority-owned
by Mr. Winkler, who in turn is a related party of the Company (see Note 7).

During
the three months ended March 31, 2015 and 2014 one outside director of the Company who also serves as the
Company’s
general and securities counsel, was paid an aggregate $12,375 and $9,927 respectively, for legal services.
The
director also received 300,000 common stock options during the three month periods ending March 31, 2015 and
2014,
valued at $2,970 and $2,970 respectively.

During
the three months ended March 31, 2015 and 2014 we incurred aggregate expenses of $110,283 and $69,316, respectively, to companies
controlled by the Chief Executive Officer, for website hosting, website development and technical advisory services, server farm
installations and IT equipment purchases. The officer also earned 100,000 common shares per month during the three months ended
March 31, 2015 and 2014 under a consulting agreement, valued at $426 and $1,350 respectively. The officer also received $220,000
in November 2014 for prepaid consulting fees toward 2015 under the terms of a consulting agreement.

Through
March 31, 2015, approximately 10% of the voting stock was beneficially held by Discovery Advisory Company, located in the Bahamas,
and Cambridge Services Inc., Kreuzfeld, LTD and Vermoegensverwaltungs-Gesellschaft Zurich LTD. (VGZ) of Switzerland. Discovery
Advisory Company, Cambridge Services Inc., Kreuzfeld, LTD and VGZ are major creditors, having advanced operating capital against
issuance by the Company of convertible promissory notes during 2015 and 2014.

During
the three months ended March 31, 2015, Discovery Advisory Company advanced an additional $175,000 and Kreuzfeld, LTD advanced
an additional $100,000. At March 31, 2015, $3,881,722 and $3,080,060 of such notes were outstanding and owed to Discovery Advisory
Company and Cambridge Services Inc, respectively and $3,734,960 and $771,958 owed to Kreuzfeld, Ltd. and VGZ, respectively.

16.
FAIR VALUE

Some
of the Company’s financial instruments are not measured at fair value on a recurring basis but are recorded at amounts that
approximate fair value due to their liquid or short-term nature, such as cash and cash equivalents, receivables and payables.

Effective
July 1, 2009, the Company adopted ASC 820, Fair Value Measurements and Disclosures. This topic defines fair value for certain
financial and nonfinancial assets and liabilities that are recorded at fair value, establishes a framework for measuring fair
value, and expands disclosures about fair value measurements. This guidance supersedes all other accounting pronouncements that
require or permit fair value measurements. The Company accounted for the conversion features underlying certain convertible debentures
in accordance with ASC 815-40, Contracts in Entity’s Own Equity, as the conversion feature embedded in the convertible
debentures could result in the note principal and related accrued interest being converted to a variable number of the Company’s
common shares.

Effective
July 1, 2009, the Company adopted ASC 820-10-55-23A, Scope Application to Certain Non-Financial Assets and Certain Non-Financial
Liabilities, delaying application for non-financial assets and non-financial liabilities as permitted. ASC 820 establishes
a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820 establishes a fair value
hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels as follows:

Level
1 — quoted prices (unadjusted) in active markets for identical assets or liabilities that
the Company

has
the ability to access as of the measurement date. Financial assets and liabilities utilizing Level 1 inputs

are
measured using present value pricing models. The company values the conversion liabilities using the Black-

Scholes
model and the assumptions are updated using independent data such as the risk free rate, volatility and expected

life
for each valuation date based on changes over time.

For
the three moths ending March 31, 2015 and 2014, the fair value of the embedded conversion liabilities was determined using the
Black-Scholes model calculating fair value based on the conversion discount as well as the term and short-term bond rate. During
the three months ending March 31, 2015 the following assumptions were used: (1) conversion discounts of 50%; (2) a look back period
of 10 days (3) bond rates of 0.02% to 0.05% and (4) volatility range of 65% to 205%.

Fluctuation
in value is largely based on the change in the daily share price accompanied by the conversion discount. The change in volatility
has the greater affect on the conversion liability during each reporting period, as higher volatility levels will yield larger
values.

The
following table reconciles, for the three months ended March 31, 2015, the beginning and ending balances for financial instruments
that are recognized at fair value in the consolidate financial statements:

Conversion Liability at January 1, 2015

$

14,482,427

Value of beneficial conversion features
of new debentures

562,130

Change in value of beneficial conversion
features during period

(136,738

)

Reductions in fair value due to principal
conversions

—

Conversion Liability at March 31, 2015

$

14,907,819

The
fair value of the conversion features are calculated at the time of issuance and the Company records a conversion liability for
the calculated value. The Company recognizes interest expense for the recognition of the conversion liability.

-16-

Kiwibox.Com,
Inc.

Notes
to Financial Statements

17. SUBSEQUENT
EVENTS

During
April 2015 and through May 18, 2015 we received $100,000 of working capital from accredited investors, which are covered by convertible
promissory notes.

-17-

Item
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The information
in this annual report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of
1995. Such Act provides a “safe harbor” for forward-looking statements to encourage companies to provide prospective
information about their businesses so long as they identify these statements as forward looking and provide meaningful cautionary
statements identifying important factors that could cause actual results to differ from the projected results. All statements
other than those statements of historical fact made in this report are forward looking. In particular, the statements herein regarding
industry prospects and future results of operations or financial position are forward-looking statements. Forward-looking statements
reflect management’s current expectations and are inherently uncertain. Our actual results may differ significantly from
management’s expectations.

The following
discussion and analysis should be read in conjunction with the consolidated financial statements of Kiwibox.Com, Inc., contained
herein and in the Company’s annual report for the year ended December 31, 2014 as filed on Form 10-K. This discussion should
not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion
reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best
present assessment of our management.

Description
of Business

Overview

On
December 31, 2009 Magnitude Information Systems, Inc. changed its name to Kiwibox.Com, Inc.

We
own and operate “Kiwibox.com”, a social networking website. Initially launched in 1999, Kiwibox.com is an online social
networking community. Kiwibox has a regional-based advertising-system that allows target-group-optimized ads for advertisers and
sponsors.

Kiwibox
Operations

Kiwibox.com
is a social network for young adults all around the world for web based - and mobile usage, a community to find new friends and
to meet new people online and in the real world. Kiwibox continues to follow the mobile trend by updating its mobile applications
to keep members engaged across its multiple platforms. Unlike traditional social networking sites such as MySpace and Facebook,
Kiwibox combines "magazine" content and social networking technology in its website, creating attractive topics for
its membership to peruse and enjoy. Kiwibox provides advertisers with a superior, worry-free advertising platform with Profile
targeted technology to reach Web browser based and mobile Apps Customers.

The
Company has successfully integrated Pixunity, a photo-sharing application, to the US market and will continue to add enhancement
features throughout the year. At the same time we continue to increase our market presence. Our promotional teams, both inside
and outside of New York City, continue to develop partnerships with event organizers and businesses along the West Coast
of the United States and plan further expansion of these types of market alliances throughout 2015.

Our
operating expenses, not including stock-based compensation, are at a level of approximately $110,000 per month (see sections “Loans
and Notes Payable”).

Kiwibox
shall continue to rely upon its advertising agreement with Triple Double U (”TDU”), an exclusive German online advertising
agency, which agreements have been negotiated by our former subsidiary, Germany-based Kwick, for the Kiwibox network for web and
mobile advertisements

Overall,
we have equipped our entire Kiwibox.com website with the newest state-of-the-art advertising features which enable sponsors to
self-direct their message to specific target audiences based on gender, age, geographic region, education, and interests. Included
in this array of features is our “search and be found” function, incorporating Search-Engine optimization with privacy
options that improves search results. We have continued in the first quarter of 2015 to facilitate friends’ searches
and establish networks of users on a global basis.

-18-

Potential
Revenue Streams and Marketing Strategy

Currently
we generate the majority of our revenue from advertising/sponsorships. We anticipate revenue growth from increased membership
activity and our revitalized website as we continue to implement new marketing strategies. Our software and networking technologies
that we incorporated during the last 2 years now permit our mobile devices to accept and receive direct advertising. Our social
networks permit us to work with potential advertisers to identify the right member groups for direct target advertising, a marketing
channel that is readily accessible to our social media community.

Our
continuing membership growth is fueled by infiltrating our users into local event venues where they participate and simultaneously
communicate with our social network via the regular deployment of our cutting-edge App updates. As a result, the Kiwibox network
enjoys continuing user sign-ups and continuing loyalty of users to our social network. Due to our long-time experience with our
German affiliate, the KWICK! Community (“Kwick”), we were able to fulfill the front-end and back-end needs for this
remarkable growth.

Community
means social network – and thrives on membership networking. Our new website is based on the latest web technology which
makes it easier for users to stay connected and to interact with each other. Most importantly, our website features permit our
community members to stay informed in “real” time about events and parties in areas we are targeting through our promotional
teams.

The
results of our marketing efforts clearly show the following positive trends in the growth of our community at March 31, 2015:

•
Active Members – Our Kiwibox.com website has 4.17 Million Active Members as of March 31, 2015, an increase of approximately
17 % over fiscal year 2014 Active users are those which have logged in to Kiwibox.com during the last 30 days.

•
New Registrations – We had 635,472 new registrations for the quarter ended March 31, 2015, an increase of approximately
10% over fourth quarter 2014. New registrations represent a participant’s initial registration on our Kiwibox.com website
as a new member.

•
Unique Visitors- – For the quarter ended March 31, 2015, we had 5.6 Million Unique Visitors to our Kiwibox.com website,
an increase of approximately 10% over fourth quarter 2014 results. Unique Visitors refers to the number of distinct individuals
requesting pages from our Kiwibox.com website during a specific period, regardless of how often they visit. Visits refer to the
number of times our Kiwibox.com website is visited, no matter how many visitors make up those visits.

•
Page Impressions – We had 512.76 Million Page Impressions during the first quarter of 2015, an increase of approximately
5 % over the prior quarter. Generally, Page Views refer to a number of pages which are viewed or clicked on our Kiwibox.com website
during the quarter.

•
Guestbook Entries – For the quarter ended March 31, 2015, Kiwibox.com had 146.2 Million Guestbook Entries, an increase of
approximately 2% from the previous quarter. A Guestbook is a logging system that permits visitors to our Kiwibox.com website to
leave a public comment.

•
Blog Entries – Our Kiwibox.com website members and visitors entered 102.5 Million Blog Entries during the first quarter
of 2015, an approximate 8% increase over the prior quarter. A Blog Entry is a message entered in our Kiwibox.com.

Market
Position

The
Kiwibox Network is in a unique position because it combines the excitement of a dating community with the benefits and accessibility
of a real social network. The Kiwibox Network encourages members to explore local events in their area, connect with other members
and enjoy the additional member exclusive benefits the social network is offering, such as games, blogging, chatting, picture-sharing
and online-flirting. This community behavior binds users to the platform and is the base for our viral marketing.

-19-

Safety

Kiwibox.com
has developed an effective monitoring model which assists in maintaining a safe site for our member base, combining both technology
based systems and user moderation. Users communicate and share information in an environment where they feel both secure and at
ease. Members of the Kiwibox team monitor forums and groups daily to ensure the content is appropriate.

In
addition to our monitoring system, the Kiwibox.com platform is equipped with advanced technology safety features. This includes
the private sphere configuration of users, contact blocs for larger age differentials, anti-spam protection and intelligent self-learning
user-scoring feature. In addition to this, Kiwibox.com has implemented state of the art security features such as former Attorney
General Andrew M. Cuomo’s hash value database in order to block images of illegal sexual content. With the combination of
human moderation and advanced technology, users are afforded a safe and secure site.

Competition

Our
primary competitors are other online social networks, including Facebook, Instagram, Tinder and Tumbler. Facebook is widely considered
as the industry leaders; however, recent statistics and strategic announcements have indicated a shift in the target audience
from teens and college students to a much broader and more adult demographic, because of their international focus. We plan to
distinguish ourselves by targeting the US-market and by combining the social-network advantages with user generated content –
from users to users, while stressing the community feeling. As these other social networks have made changes to their websites
we have been able to capitalize on the disenfranchised users and bring them into our online community.

Technology
Development

The
Company attaches great importance to its innovative technology developments and continues to follow the top social network market
leaders with technology upgrades, providing its users with an alternative social networking opportunity.

Intellectual
Property

The
Kiwibox.com web and mobile software and other related intellectual property rights are important assets. We hold the Internet
domain names Kiwibox.com, Kiwibox.net, Kiwibox.org, as well as other country-code top level domains and feature-based domains
like 4kiwi.com.

Governmental
Regulations

Our
Kiwibox website operations are subject to state, federal and international laws, rules and regulations that cover on-line business,
privacy policies, consumer protection and product marketing. The Kiwibox website business is subject to state, federal and international
laws, rules and regulations applicable to online commerce, including user privacy policies, product pricing policies, website
content and general consumer protection laws. Various laws, rules and regulations have been adopted, and probably will be
adopted in the future, that apply to the Internet, including available online content, privacy concerns, online marketing, “spam”
and unsolicited commercial email, taxation issues, and regulations that effect and monitor the quality of products and services.

A
portion of these laws, rules and regulations that concern the Internet and its uses have been only recently adopted. Courts and
administrative agencies have not yet fully interpreted these legal requirements as to their application and scope. Accordingly,
our Kiwibox website business is subject to the uncertainties of future interpretations and application of these legal requirements.
The application and interpretation of these legal requirements or the passage of new and/or revised laws, rules and regulations
could reduce the demand for Kiwibox website services, increase its operational costs, and expose it to potential liability. Any
such events could have a material adverse effect upon our Kiwibox website business and financial condition. Our failure, or that
of our business partners, to accurately predict and anticipate the interpretation or application of these laws, rules and regulations,
whether now in force or adopted in the future, could have a detrimental impact on our operations, create negative publicity for
us and expose us to potential liability.

-20-

State
and federal agencies are applying consumer protection laws to regulate the on-line use, collection and dissemination of personal
information and website content. These laws require us to implement programs to notify our website users of our privacy and security
programs. Consumer protection laws will require us to obtain the consent of our website users if we want to collect and use certain
portions of their personal information. We are currently voluntarily working in partnership with the New York State Attorney General’s
office and have incorporated hash value technology into our website.

The
Federal Trade Commission (“FTC”) is the lead federal agency monitoring Internet websites and their content. State
attorneys general have become active monitors of the Internet at the local State level. These governmental bodies may investigate
or bring enforcement actions against website operators they deem in violation of applicable consumer protection laws. We believe
that our Kiwibox website’s collection and dissemination of information programs, including our privacy policies, do and
will continue to comply with existing laws. However, a decision by a federal or state agency that any of our Kiwibox website’s
business practices do not meet applicable legal standards could result in liability and have a material adverse effect on our
business and financial condition.

Employees

Currently,
we have 4 employees.

Results
of Operations for the Three Months Ended March 31, 2015 Compared to the Three Months Ended March 31, 2014

For
the quarter ended March 31, 2015, total revenues amounted to $8,955 compared to $10,914 recorded in the first quarter in 2014 .
All revenue was received from our affiliate company Kwick

Gross
profit (loss) for the quarter ended March 31, 2015 amounted to $6,122 as compared to $10,914 for the corresponding interim period
in 2014.

After
deducting selling and general and administrative expenses of $330,333 for the first quarter ended March 31, 2015 compared to $248,806
recorded in the same period in 2014, the Company realized an operating loss of $324,211 for the first quarter of 2015 as compared
to an operating loss of $237,892 for the same period in 2014 . This increase is largely the result of our increased costs
associated with servicing our on line users.

The
quarter concluded with a net loss of $1,036,312. After accounting for dividends accrued on outstanding preferred stock, which
totaled $12,816, the net loss applicable to common shareholders was $1,049,128 or $0.002 per share compared to a net loss applicable
to common shareholders of $944,857 or $0.001 per share for the first quarter in the previous year.

Liquidity
and Capital Resources

We
have financed our business with new debt since our cash flow is insufficient to provide the working capital necessary to fund
our operations. We received $275,000 in cash from short-term loans from accredited private investors during the quarter. We
have an ongoing and urgent need for working capital to fund our operations. If we are unable to continue to receive new equity
investments or obtain loans, we will not be able to fund our operations and we will be required to close our business.

Our
deficit in working capital amounted to $31,652,987 at March 31, 2015, as compared to $30,608,081 at December 31, 2014. Stockholders’
equity showed an impairment of $31,634,435 at the end of the period, compared to an impairment of $30,585,307 at the beginning
of the year. The negative cash flow from operations during the three months totaled $282,137 and was financed by new debt.

The
Company has $0 of bank debt as of March 31, 2015. Aside from trade payables and accruals, our remaining indebtedness at March
31, 2015 consisted of certain notes and loans aggregating $11,908,700 and the following obligations. Amounts due to related parties
were $69,969. The liabilities from derivative conversion features were $14,907,819. The position “Obligations to be settled
in stock” of $280,858 accounts for common shares due under consulting agreements, and for services to be settled in common
stock options and warrants, where the underlying securities had not yet been issued. Current liabilities also include $748,471
accrued unpaid dividends on outstanding preferred stock. Such dividends will be paid only if and when capital surplus and cash-flow
from operations are sufficient to cover the outstanding amounts without thereby unduly impacting the Company’s ability to
continue operating and growing its business.

-21-

Our
current cash reserves and net cash flow from operations expected during the near future will be insufficient to fund our operations
and website development and marketing plan over the next twelve months. We expect to fund these requirements with further investments
in form of debt or equity capital and are in ongoing discussions with existing investors to secure funding. There can be no assurance,
however, that we will be able to secure needed financing in the future and identify a financing source or sources, and if we do,
whether the terms of such financing will be acceptable or commercially reasonable.

Absent
the receipt of needed equity investment or loans, we will be compelled to severely curtail operations and possibly, close
our business operations. Assuming we can receive current funds to continue to operate our businesses, we may need additional funding
for marketing and website development, absent of which our website development, results of operations and financial condition
could be subject to material adverse consequences.

Item
3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

A
smaller reporting company is not required to provide the information required by this Item.

Item
4T.CONTROLS AND PROCEDURES

(a)
Evaluation of Disclosure Controls and Procedures.

The
Company’s Chief Executive Officer and Chief Financial Officer has evaluated the effectiveness of the Company’s disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the fiscal period ended March
31, 2015 covered by this Quarterly Report on Form 10-Q. Based upon such evaluation, the Chief Executive Officer and Chief Financial
Officer has concluded that, as of the end of such period, the Company’s disclosure controls and procedures were not effective
as required under Rules 13a-15(e) and 15d-15(e) under the Exchange Act.

As
of March 31, 2015, management assessed, with the participation of the Chief Executive Officer and Chief Financial Officer, the
effectiveness of our internal control over financial reporting based on the criteria set forth in Internal Control – Integrated
Framework for effective internal control over financial reporting established in Internal Control--Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") and SEC guidance on conducting
such assessments. Based on that evaluation, they concluded that, during the period covered by this report, such internal
controls and procedures were not effective as more fully described below. Based on management’s assessment over
financial reporting, management believes as of March 31, 2015, the Company’s internal control over financial reporting was
not effective due to the following deficiencies:

1.
The Company’s control environment did not have adequate segregation of duties and lacked adequate accounting resources to
address non routine and complex transactions and financial reporting matters on a timely basis.

2.
The Company had a part time chief financial officer performing all accounting related duties on site, presenting the risk that
the reporting of these non routine and complex transactions during the preparation of our future financial statements and disclosures
may not be accomplished in a timely manner. Additionally in September 2012 the Company hired a comptroller to assist the Chief
Financial Officer.

Company
management believes that notwithstanding the above identified deficiencies that constitute our material weakness, that the financial
statements fairly present, in all material respects, the Company’s balance sheets as of March 31, 2015 and December 31,2014
and the related statements of operations, stockholders’ equity, and cash flows for the quarters ended March 31, 2015 and
2014, in conformity with generally accepted accounting principles.

Management’s
Remediation Initiatives

In
an effort to remediate the identified material weaknesses and other deficiencies and enhance our internal controls, we have initiated,
or plan to initiate, the following series of measures:

-
We will continue to seek qualified fulltime or part time employees and third party consultants to supplement our financial personnel
when and if additional resources become available. - We are continuing to institute more stringent approval processes for financial
transactions, and

-
We are continuing to perform additional procedures and analyses for significant transactions as a mitigating control in the control
environment due to segregation of duties issues.

Changes
in Internal Controls over Financial Reporting

Other than
described above, during the quarter ended March 31, 2015, there have been no changes in the Company’s internal control over
financial reporting that have materially affected, or is reasonably likely to materially affect, the Company’s internal
control over financial reporting.

-22-

PART
II - OTHER INFORMATION

Item
1 LEGAL PROCEEDINGS

At
the time of this report, the Company is not a party in any pending material legal proceedings.

Item
1A. RISK FACTORS

A
smaller reporting company is not required to provide the information required by this Item.

Item
2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a)

Issuance
of unregistered securities

During
the first quarter in 2015 the Company did sell any unregistered securities.

(b)

Not
applicable

(c)

None

Item
3 DEFAULTS UPON SENIOR SECURITIES

The
Company, as of the date of this filing, is in arrears on the payment of certain dividends on its Series A, C, and D Senior Convertible
Preferred Stock. Such arrears total approximately $697,000. These dividends have been accrued, however, the Company’s management
has refrained from making payments at this time because of the absence of positive equity and/or surplus funds.

Item
4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

Item
5 OTHER INFORMATION

None

-23-

Item
6 EXHIBITS AND REPORTS ON FORM 8-K

(a)

Exhibits

31.01.

Certification
of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002, dated May 15, 2013.

31.02.

Certification of Chief
Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002, dated May 16, 2013.

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